Ormet wins approval for $130 million asset sale over PBGC objection

By Jim Witters

Wilmington, Del., June 3 - Ormet Corp. was granted approved for the $130 million sale of substantially all of its assets to stalking horse bidder Smelter Acquisition LLC during a June 3 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Judge Mary F. Walrath approved the sale over the objection of the Pension Benefit Guaranty Corp., which argued that the asset purchase agreement constituted a Chapter 11 plan and unfairly treat the PBGC's claims.

Under the sale agreement, the buyer is paying some administrative, priority and general unsecured claims, but not those of the PBGC.

Attorney Joel W. Ruderman said the PBGC filed claims totaling more than $237 million in the bankruptcy case.

Walrath said she understands the PBGC claims, but believes Ormet had sound business reasons for the sale. And she said that the purchaser can dictate which liabilities it wishes to assume in the sale transaction.

Even an orderly liquidation under Chapter 7 of the bankruptcy code would require funding unavailable to the debtor or to a Chapter 7 trustee, Walrath said.

During the hearing, Walrath heard testimony from Lloyd A. Sprung - senior managing director at Evercore Group LLC, Ormets financial adviser and investment banker - that the aluminum market has fallen 18% to 20% since the company filed for bankruptcy.

Sprung said the $130 million credit bid by Smelter Acquisition was the only bid received, despite an aggressive pre-petition and post-petition marketing effort.

Smelter Acquisition is a portfolio company owned by private investment funds managed by Wayzata Investment Partners LLC.

Wayzata entities also are the pre-petition term loan lenders and debtor-in-possession term loan lenders. And they were unwilling to continue to finance Ormet if the sale had not been approved, Sprung said.

Approval of the sale means the company will continue operations, employing about 2,000 workers.

As part of the bankruptcy proceeding and the sale, a new collective bargaining agreement with the United Steel Workers union will become effective in 2014.

The purchaser also agreed to fund a wind-down budget of $625,000.

The sale cannot close until Ormet receives a ruling from the Ohio Public Utilities Commission on its request for relief from a power agreement with Ohio Power Co.

Ohio Power attorney Russell R. Johnson, III, told the court that his client is contesting the Ormet request to the Ohio commission and does not have an agreement in place with Ormet or the buyer.

Ormet, a Hannibal, Ohio-based producer of aluminum, filed for bankruptcy on Feb. 26. The Chapter 11 case number is 13-10334.

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